PCG Resumes Appeal Against IR35

by Jason Gorringe, Tax-News.com, London

05 December 2001

The Professional Contractors Group (PCG) is taking the UK government to the Court of Appeal this week from December 4-6, in an attempt to prove that IR35, the controversial tax on small, knowledge-based businesses, is illegal under European law.

The court case appeal follows the High Court dismissal of PCG's claims in March and April earlier this year that IR35 contravenes European legislation concerning illegal state aid and is a barrier to free movement. And therefore, argued the PCG, IR35 should have been removed from the Statute Books.

At the time Mr Justice Burton found against the PCG on the points of law, but found in their favour on matters of fact and was critical of the Inland Revenue's approach to the legislation. PCG's Chairman, Jane Akshar, said: 'The High Court found in PCG's favour on so many factual issues that we felt it was only a small step to prove that not only is this law unfair and uncompetitive - it is also illegal.'

The UK Inland Revenue introduced IR35 after the March 1999 Budget. The PCG argues that the ruling treats small businesses in the knowledge-based sector as 'disguised employees' for tax and NI purposes, preventing them from operating on similar terms to their larger competitors.

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